Turnover of industrial capital, commercial and bank credit: modern Unoist approach 1 Introduction

 

1. Introduction

Much of Marx’s theory of money and credit is based on gold money. It is therefore understandable that endogenous money supply theories (EMSTs), such as the Monetary Circuit Theory (MTC), criticize Marx’s approach as well as the neoclassical view, which they regard as a barter theory. EMSTs argue that money is created "from nothing" (ex nihilo) by bank credit. However, this argument has two problems.

First, EMSTs assume not only that money is created from nothing, but also that banks themselves somehow emerge from nothing.

Second, banks always assess the creditworthiness of borrowers, which is based on the commodity value of the borrowers’ assets. Since borrowers hold assets expected to be sold in the future, credit money is not issued from nothing—it is issued in anticipation of money returning from commodity sales.

Kozo Uno explained the logical emergence of bank credit from idle money capital during the turnover of industrial capital (Uno 1980, 109). Building on that, since the 1980s, Unoist scholars have emphasized the uncertainty of circulation and analyzed commercial and banking capital as delegated functions of circulation originally belonging to industrial capital. This approach is called the “Theory of Differentiation and Emergence.” 

Furthermore, some Unoists propose a new commodity theory of money. According to this view, money based on commodity value takes two forms: material money and claim-type money. The former is typically gold, while the latter is typically inconvertible money, understood as a claim on commodity value.

Monetary Circuit Theory (MCT) also assumes that money creation corresponds to products made by borrowing firms. For clarity—though somewhat simplistically—MCT holds that banks issue money based on added value in production. In contrast, Unoists argue that money is issued based on pre-existing commodity value in circulation. This theoretical difference was clearly shown in Tamotsu Okahashi’s critique of Schumpeter during the Banknote Controversy in Japan from the late 1950s to 1960s (Iwata 2021, 105–107).

This paper focuses on how credit relations emerge from capital turnover and how bank credit logically emerges from commercial credit.

Reference

Iwata, Yoshihisa (2021) Even inconvertible money is credit money: Theories of credit money in Japanese Marxian economics from the banknote controversy to modern Uno theories. Journal of Tokyo Keizai University: Economics 311: 99–120.

Uno, Kozo (1980) Principles of Political Economy: Theory of a Purely Capitalist Society. Brighton, Sussex: Harvester.